By Lisa Twaronite TOKYO, Jan 28 (Reuters) - Japanese government bonds startedthe week with a softer tone on Monday, with the benchmark yieldmoving away from a six-week low after the yen dipped and U.S.Treasury yields rose. Early on Monday, the dollar touched a fresh 2-1/2-year highof 91.32 yen. U.S. Treasuries yields surged to theirhighest in three weeks on Friday after data showed Europeanbanks are repaying more emergency loans than expected.

The benchmark 10-year JGB futures contract endeddown 0.25 point at 144.30, moving away from Friday's intradayhigh of 144.58, its highest level since Dec. 13. "Last week, we had a pretty solid 10-year JGB market, but Ithink there was a lot of profit-taking today in light of theweak Treasuries on Friday, and that may have caught some peopleby surprise," said Tadashi Matsukawa, head of fixed income atPinebridge Investments in Tokyo. Minutes from the Federal Reserve's January meeting will bereleased on Wednesday and investors will be on alert for anysignal that the U.S. central bank is mulling an "exit strategy"to its bond buying, Matsukawa said. The 10-year JGB yield rose 2.5 basis pointsto 0.745 percent. On Friday, it slumped to 0.720 percent, itslowest since Dec. 14. "We advise long-only investors to wait for dip buying toaround 0.8 percent," said strategists at RBS Securities Japan,in a note to clients on Monday. The yield curve is likely to reverse course from last weekwith bear steepening up to the 10-year level and bear flatteningin the sectors over 10 years, they said.

A brighter economic view also undermined demand forsafe-haven bonds. Japan's economy will likely grow 2.5 percent in the fiscalyear starting in April, the government said on Monday, as PrimeMinister Shinzo Abe's ambitious fiscal and monetary policiesboost domestic demand and a rebounding overseas economy helpsexports. The government's projection for real gross domestic productis roughly in line with the Bank of Japan's estimate issued lastweek, but it is stronger than the median estimate for 1.8percent growth in a Reuters poll. The recently battered superlong zone fared better than otherJGB tenors. While longer maturities have underperformed due toconcerns that government's aggressive reflationary policies willeventually lead to inflation, market participants say thatmonth-end buying could emerge this week. Some funds buylonger-dated debt to extend the duration of their portfolios. The 20-year yield added half a basis point to1.775 percent, while the 30-year bond yield wasflat at 1.995 percent, after earlier rising as high as 2.0percent." "There seems to be some dip-buying whenever the 30-yearyield rises above 2.0 percent," said a fixed-income fund managerat a Japanese trust bank in Tokyo. The five-year yield added 1 basis point to0.155 percent. Last week, it fell as low as 0.140 percent, itslowest recorded level since Japan started issuing 5-year notesin 2000, in the wake of the Bank of Japan's decision to doubleits inflation target to 2 percent and make an open-endedcommitment to buying assets from next year. A weekly gauge of sentiment in the Japanese government bondmarket improved but remained solidly in negative territory for afourth straight period, the latest Reuters poll showed onMonday.